Boughton vs. Otis and others

Boughton vs. Otis and others. Under the 12th section of the general manufacturing act, (Laws of 1848, ch. 40,) requiring every company incorporated under that act to make and publish a report of its condition, annually, within twenty days from the 1st of January, and providing that “ if any of said companies shall fail to make and publish such statement, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be made,” those trustees who are guilty of the neglect of duty, and those only, are liable to the penalty mentioned in the statute. For a neglect to make and publish the statement, on the part of the trustees in office on the 1st of January, trustees who are subsequently elected are not liable. THIS was an appeal from an order made at a special term, overruling a demurrer to the plaintiff’s complaint. The complaint stated that on the 1st of J anuary, 1857, the Rochester Novelty Works was a corporation, created under the general manufacturing law, (Laws of 1848, chap. 40.) That Boody, Ritter and Huntington were trustees of said company from the 1st of January to some time in March, 1857; that from and after said some time in March, Boody, Otis and Palmer were, and continued to he, trustees thereof until some time in September, 1857; and that the trustees of said Novelty Works did not, within twenty days from the 1st of J anuary, .1857, or at any time since, file and publish- the statement or report required by the 12th section of the said act; that said Novelty Works was indebted to the plaintiff for goods sold between the 18th of January, 1856, and the 5th May, 1857, by reason whereof the plaintiff claimed that both sets of trustees were liable for such indebtedness. The defendant demurred to the complaint, ou the ground that it did not state facts sufficient to constitute a cause of action." W. F. Cogswell, for the appellant. H. Humphrey, for the plaintiff. [MAJORITY — By the Court, E. Darwin Smith, J.] By the Court, E. Darwin Smith, J. The plaintiff’s right of action depends upon the neglect of the trustees of the Rochester Novelty Works, within twenty days from the first of January, 1857, to file and publish the statement or report of its condition, required by the 12th section of the general manufacturing act, (Laws of 1848, p. 54.) The statute provides that “ if any of said companies shall fail to make and publish such statement, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be made.” This is a penalty imposed for neglect of duty. The penalty consists in depriving the trustees guilty of the fault or neglect of duty of the irresponsibility which pertains to the directors, trustees and stockholders of corporations, and subjecting such trustees to a personal liability for the debts of the corporation then existing. It is a penalty imposed, I think, upon those guilty of the neglect of duty, and those only. It would be unjust to extend it further; and I think such was not the intention of the legislature. The directors or trustees of a corporation making default might well be deemed to elect to incur the responsibility imposed by the statute. They may fitly be punished in the manner provided by the act, by being rendered personally liable for the debts of the corporation. Such trustees are liable for all debts then existing, and for all such as may be thereafter contracted until the proper statement shall be made and published. New trustees coming in, I think, are only liable for their own defaults. It is the failure to make and publish the report within the twenty days next after the first of January of some year, that creates the penalty: that subjects the trustees then in office to personal liability for the debts of the corporation then existing and subsequently contracted. Such trustees may exempt themselves from personal liability for future debts by making such statement after the twenty days, but not for those then existing. Eor such debts their liability is fixed by permitting the twenty days to elapse without making and publishing the statement required by the act. This, I think, is the true construction of this provision; and as the defendant Otis was not in default in making such statement within twenty days after the first day of January of any year, he was not liable in this action, and the demurrer to the complaint was well taken. [Monroe General Term, March 7, 1859. T. R. Strong, Welles and Smith, Justices.] The judgment of the special term, overruling the demurrer, should be reversed, and judgment be given for the defendant on such demurrer. Judgment reversed.